“An automatic cap on bonus payouts”

On one of the few occasions when the EU actually does some good in the world instead of prolonging global economic chaos the UK has gone against history, morality and common sense and opposed the very reasonable proposal of the EU to cap bonuses of those in the banking industry. After an series of scandals from LIBOR, to economic meltdown, incompetence, corruption and greed the UK is placing itself on the wrong side of history by clinging mindlessly to an outmoded neoliberalism that has spectacularly failed.

Reports note that “The agreement, announced by diplomats and officials after late-night talks on Wednesday between EU country representatives and the bloc’s parliament, mean bankers face an automatic cap on bonus payouts at the level of their salary, or two-times pay if a majority of shareholders vote in favour. But it represents a setback for the British government, which had long argued against such absolute limits. The City of London, the region’s financial capital with 144,000 banking staff and many more in related jobs, will be hit hardest. David Cameron said that he would “look carefully” at the proposed new regulations while defending the UK’s position as an international financial hub”.

The article goes on to mention “The change in the law will be introduced as part of a wider body of legislation demanding banks set aside roughly three times more capital and build up cash buffers to cover the risk of unpaid loans, for example. The backing of a majority of EU states is needed for the deal to be finalised. One member of the European parliament privately signalled that the deal could yet change, pointing to the ‘reservations’ of some EU countries”.

Yet those who oppose this sound measure come up with few real and valid arguments against it, with some claiming, or implying, that profit itself will be outlawed. Such “arguments” should be dismissed for the hyperbole that they are. Capping the pay of bankers and those in finance will be beneficial because it will mean more control over an industry that has run riot over the last 30 years and bring some balance back into the system that seems bent on rewarding those who fail spectacularly, eg Bob Diamond.

Another piece has noted “Michael Fallon, the enterprise minister, said that the Treasury will demand at meetings in Brussels this week that the proposals are flexible enough to allow UK banks and foreign banks based in London to pay competitive rates. He said that although the new regulations on remuneration would only affect the highest paid, it could ultimately mean whole banking divisions being moved away from the UK as banks seek to operate in the more flexible markets of Asia and the US”. Yet, this British minister is also part of a government that has promised a re-balancing of the economy yet oddly enough it does not seem to include the industry that caused the crisis in the first place.

In related news reports mention that Switzerland, no bastion of communitarian thinking, “Under the proposal, shareholders will be given the right to hold a binding vote on executive remuneration. Companies would also no longer be able to pay so-called ‘golden hellos’ and ‘golden parachutes’, whereby senior managers receive a one-time cash lump sum, often running into millions of pounds, when joining or leaving a company. Polls show the majority of Swiss plan to vote “yes” in the referendum, despite businesses warning it will drive out companies from the country. The move will also be a blow to the many foreign firms that have moved their headquarters to Switzerland in recent years to benefit from better tax deals, including from Britain”.